June 29, 2020
As June draws to a close and we get ready to begin Fiscal Year 2021 (FY2021), I am writing to give you an update on the finances of the University. We have recently addressed the critically important issues around the health of our community and our plans for public health protocols, testing, and contact tracing for the fall. In my letter a month ago I let you know that we had begun the process of revising the FY2021 University budget with the goal of having the revisions in place before July 1.
Where are we today? Deposits for all our programs are now in place, and from these we can estimate enrollments for the fall and spring. The deposits for almost all our undergraduate and graduate programs are strong; however, there is enormous uncertainty about whether these students can and will attend. This is especially true for our international students for whom obtaining visas is not yet possible. The Learn from Anywhere (LfA) learning model will be critical to accommodating these students’ needs, as well as those of others who may not return to campus but may decide to enroll.
The academic and administrative leadership has worked over the last month to revise our budgets using projections for fall and spring enrollments. Using these estimates, the total revenue shortfall in next year’s budget is $264 million. This amount is equal to approximately 16 percent of our expenditures, excluding those connected with research, student financial aid, and other costs such as debt service that cannot be reduced.
Let me review the actions we have already taken for the coming fiscal year:
- Applied our undesignated reserves and budget contingencies to reduce the shortfall
- Frozen salaries for faculty and staff
- Reduced the salaries of University executives
- Frozen University contributions to the retirement program
These actions and other savings amount to a decrease of $168 million in expenses in the FY2021 University budget and cover approximately 64 percent of the shortfall, leaving $96 million in budget cuts still to be identified. The academic and administrative leadership has been working over the last month to identify budget reductions to close this gap. This process has now been completed, and with these additional adjustments, we have a budget, although not quite in balance, that is a good starting point for beginning the fiscal year on July 1. You will hear from your unit head or academic dean about the specific elements of the plans for your units and schools/colleges.
As part of the budget planning process, we are implementing significant cost reductions in expenses not connected to paying staff and faculty. We have also worked to minimize the number of current employees who will be affected by these budget reductions by eliminating or deferring hiring for approximately 200 open and unfilled positions. Regrettably, layoffs and furloughs (unpaid leaves of absence with benefits continuation) will be necessary in some units of the University as a consequence of the shortfalls we are predicting. How many employees will be affected? Based on our current assessments, we are anticipating that no more than 250 employees will be laid off or furloughed.
With these decisions, we are now set to begin the budget year; however, I must reiterate the considerable uncertainty that still exists relative to what our enrollments will be in the fall, and thus, what actual revenue and expenses will be, compared to our revised budget. It is possible that further budget reductions will be necessary.
We are all working and living with extraordinarily difficult circumstances as we attempt to define a new normal with COVID-19 in our midst. At this moment, I feel it is best to share the realities of our financial situation and to err on the side of transparency with you.
I will continue to update you as the fall becomes clearer. Please stay safe and well.
Robert A. Brown